Hidden Financial Drains to Avoid

We’re in a four-part series covering areas where your church might be losing money and how to plug those leaks. In my last post, I addressed the issue of inefficient systems and processes. This edition, however, is regarding areas of potential risk that could cost your church financially and more.

At the risk (pun intended) of seeming odd by quoting my own material

“A risk is something that could happen that would result in injury, damage, loss, or other negative outcomes.

Risk management is the process of identifying potential risks and putting safeguards in place to prevent those risks. It also includes determining how to lessen the impact of a risk that does occur.”

In the church context, risks could include:

  • Theft, financial mismanagement or fraud
  • Security and safety threats such as natural disasters or even an active shooter situation
  • Data loss
  • Sexual sin, abuse, or misconduct
  • Failure to proactively maintain church facilities
  • And more…

Many of these risks have the potential for causing physical, emotional, and spiritual harm. It would be extremely challenging to lead a congregation through the aftereffects of those situations. Unfortunately, that’s not where most risks end. Each of these risks also have the potential to create financial challenges as well. Damaged or stolen property, lawsuits, extensive repair work and more could add up quickly.

Now, please let me be clear here…I’m much more concerned (as I expect you are) about the potential for physical, emotional, or spiritual harm coming to anyone within your congregation.   Preventing these risks from happening is much more about preventing that damage than it is about not losing money. However, finances are still part of the picture. We’re still responsible for stewarding resources wisely and risk management is one tool we should use in that effort.

Risk mitigation steps include:

  • Running background checks on potential childcare volunteers
  • Establishing off-site or cloud storage for your electronic files and data as a backup
  • Developing an emergency response plan and training your team on how to handle various situations
  • Putting financial controls into effect to ensure accountability
  • Purchasing insurance to cover potential losses due to natural disasters, water leaks, fires, lawsuits, and more (see this article I wrote for Worship Facilities magazine on various types of insurance)

You probably have at least some of these risk mitigation steps already in place. Regardless, I recommend performing a risk management review process at least annually.

Here’s where to start:

  1. Create a list of potential risks to your church. Starting a leadership meeting with the question, “What incident, if it occurred, could potentially take out our church?”. Granted, that doesn’t make for an uplifting discussion but it should help get the conversation moving. If you’d like a list to start from, click here to get a copy of “10 Risks Every Church Leader Should Consider.”
  2. Document what you’re already doing to prevent each risk.
  3. Identify where you don’t have any mitigation steps in place or where you think additional steps are needed.
  4. Determine who should take responsibility for ensuring those additional mitigation steps are identified and established. Set due dates and request progress updates on a weekly or bi-weekly basis until each is completed.
  5. Review each risk and the associated mitigation steps at least annually. Is your team performing the processes assigned within the mitigation steps (updating background checks, etc.)? Have new staff members and volunteers received applicable training?

Taking action to prevent risks from happening at your church is part of the church leadership’s responsibility. No one likes to think these incidents could occur within their congregation. However, wisdom requires we do our best to prevent and reduce the risk of these risks from happening within our churches.

How does your church leadership team approach risk management?